Getting the most out of your healthcare spend

William Yatscoff | May 5, 2009

Every company’s aim is to maximize profit, but only in tough times like the current economic crisis are the layers of the organization peeled back to reduce costs. Offering benefits is part of a necessary compensation package to retain key employees while staying competitive in the labour market.

Benefits have the same problem during the economic crisis as they did before; they are expensive. Next year they will be even more expensive. Cutting back benefits is the easiest and most cost-effective way to reduce costs. Unfortunately, this can have negative effects on morale and damage corporate culture. Here are some tips to avoid cutting benefits, reducing budgets, and saving money.

The first stop for many firms should be wellness programs. These programs have proven abilities to improve morale, increase productivity, increase employee health, and reduce turnover with greater success than health insurance offerings. Health promotion is a positive corporate culture indicator and provides employers with the ability to invest a dollar and receive over a dollar in savings and profitability. The return on investment can be as much as eight times greater by lowering health insurance premiums and reducing disability claims.

The proper communication prior to, during, and after implementation will determine the value employees find and use. However, wellness programs do not offer instant satisfaction for cost savings and will take some time to realize.

The large shift of insurance to health spending accounts (HSA) is one of the easiest and most effective ways to save dollars. Insurance companies aim for about a 30% margin while HSAs are typically around a 10% margin. For instant savings of 20%, those numbers alone should convince everyone to switch. The problem is that a small portion of people within any organization tend to have high health needs, the drug costs for which are astronomical. Changing to a health spending account may destroy the paternalistic culture of a company by uncaring for those who get sick. One way to offset this would be to offer high deductible health insurance, such as $3000 per person. This would cover all employees in case they got sick and used up their HSA on health needs.

The problem with high deductibles is getting an insurance company to buy into it. However, one way to do this is to get the government to foot the bill. While most provinces have provincial drug plans, they vary greatly. In Ontario, for instance, there is an income test that determines deductible, while in Alberta there is no deductible or income test, only a quarterly payment. Although this may make the process more complicated, cost savings are still there.

It’s really all about bang for your buck. Putting in place a wellness programs to lower the overall health of employees before they are sick is the greatest cost savings and productivity program currently available.